The bonds are a general obligation of the State of Nevada, to which its
full faith and credit are pledged. Debt service is supported by a
statewide property tax levy that is subject to both constitutional and
statutory limitations. State law further provides that if property tax
revenues are insufficient to pay GO debt service, moneys are to be
borrowed from the general fund and repaid from future property tax
revenues to the extent other moneys are not available.

The bonds are expected to be paid from net pledged revenues of the
Colorado River Commission derived from sales of energy output of the
Hoover Dam, subordinate to outstanding bonds; however, the rating is
based on the state's GO pledge.

KEY RATING DRIVERS

IMPROVEMENT IN WEAKENED ECONOMY: The state's economy is returning to
growth with employment growth across a broad range of sectors, positive
trends in tourism and gaming, and some improvement in the housing
market. Concentrated in the Las Vegas/Clark County area, the state
economy remains largely based on gaming and entertainment.

CONSERVATIVE FINANCIAL MANAGEMENT: State financial operations are
conservatively managed to produce budgetary balance even in times of
economic weakness. Some financial flexibility is derived from the
state's practice of appropriating only 95% of expected revenues and
maintenance of satisfactory reserves.

MANAGEABLE DEBT POSITION: Nevada's debt places only a moderate burden on
resources. Although the state refunded debt for budgetary relief through
the downturn, amortization remains above average. Pension funding has
declined but the state's overall liabilities are below average.

RATING SENSITIVITIES

The rating is sensitive to limits in the state's economy, volatility in
the revenue stream, and maintenance of structural budget balance.

CREDIT PROFILE

Nevada's rating reflects the state's conservative debt position, solid
financial controls, and historically responsive financial practices, as
well as its success in managing rapid population growth and development
prior to the recession. Nevada's debt is only a moderate burden on
resources and is supported by a separate statewide property tax levy,
which, during the extended period of tax base growth that preceded the
recession, produced revenues in excess of that needed for debt service.
The state accumulates any excess in a reserve that, as of June 30, 2013
equaled approximately 88% of fiscal 2014's debt service that is paid
from property taxes. With a significant decline in the tax base due to
the recession, the tax levy no longer covers annual debt service and the
state expects to gradually reduce the reserve so as to not raise the tax
levy rate, with a target of maintaining 50% of the next fiscal year's
debt service in reserve. If property tax revenues are insufficient,
funds for debt service are borrowed from the general fund and repaid
from future property tax collections to the extent other funds are not
available.

GROWTH ACCELERATING

Nevada was slow to emerge from the national recession but is showing
stronger signs of a return to growth. Nevada was among the states
hardest hit by the recession, during which employment fell almost as
rapidly as it had been previously increasing, gaming and related tourist
activities declined, population declined for the first time, and the
state led the nation in housing value declines and mortgage
delinquencies. Nevada's economy remains based on gaming and
entertainment and had been characterized by rapid growth with the
population expanding at an extraordinarily rapid rate, 125% since 1990,
compared with 24% for the U.S. This rapid growth had been matched by
employment gains, and in particular, a surge in construction employment
in the middle of the last decade. The nature of the recession, led by a
housing market crash and declines in consumer spending, had a
particularly severe impact on the state.

Non-farm employment in Nevada declined much further than the national
average, down 9.1% in 2009 and 2.7% in 2010 versus the national rate of
4.3% and 0.7% during those years and an unemployment rate, which had
been lower than the national average for much of the last decade,
significantly higher than the U.S. rate. Nevada lost approximately
190,000 jobs in the recession, including over 90,000 construction jobs.
Although construction employment is still far below its former peak, the
sector has been expanding since August 2013 and recent performance is
quite strong with 10.6% year-over-year growth in March 2014.

The economy is showing signs of a stronger recovery. Non-farm employment
has begun to grow again, now at a much stronger pace than the nation.
After matching the U.S. growth rate at 1.7% in 2012, non-farm employment
grew 2.7% in 2013, well above the U.S. rate of 1.7%. Strong growth
continues into 2014 with a year-over-year increase of 4.1% in March. The
unemployment rate, while still higher than the U.S. rate at 8.5% in
March is well off of its peak of 13.8%. The housing market continues to
be weak but existing home sales and prices have begun to increase and
mortgage foreclosures are declining. The leisure and hospitality sector
lost approximately 40,000 jobs during the recession but has been adding
jobs since June 2010 and is up 4.0% year-over-year in March 2014.
Visitor volume to Las Vegas decreased in 2008 and 2009 before beginning
to rebound in 2010. Statewide gaming revenues, accordingly, also
declined in 2008, 2009 and 2010, before turning around in 2011. Visitor
trends are improving with visitor volume, occupancy rates, room tax
revenues, and gaming revenues all expanding since 2011.

CONSERVATIVE FINANCIAL MANAGEMENT

The economic downturn had a severe impact on the state's financial
operations, with the economically sensitive revenues upon which the
state relies, sales tax and gaming related revenues, falling
dramatically. The state took action through three biennial budgets to
stabilize financial operations in light of significantly reduced
revenues. Following the drawdown of the rainy day fund to solve a fiscal
2008-2009 biennial budget gap, the state responded to additional
financial stress in the fiscal 2010 - 2011 biennial budget with a
significant but temporary increase in taxes including raising sales and
business taxes, and an increase in the lodging tax and other fees. The
legislature also made changes to shore up the depleted rainy day fund.

Revenues exceeded budget expectations in both years of the fiscal
2012-13 biennium that ended June 30, 2013. The budget included
expenditure reductions and revenue enhancement, through the extension of
four of the temporary taxes enacted in the prior budget, to achieve
balance. Employee expenses were reduced through the continuation of six
furlough days, a 2.5% reduction in employee salaries, a 1% increase in
the employee retirement contribution (from 11.25% to 12.25% of payroll),
a redesign of health benefits, and a continuing freeze on pay increases.
Tourism related revenues improved, with the sales tax up 6.0%
year-over-year in fiscal 2012 and another 5.5% in fiscal 2013. Gaming
related revenues grew just 0.4% in fiscal 2012 but strengthened in
fiscal 2013 with 3.5% growth.

The enacted budget for the current fiscal 2014-2015 biennium continued
many of the expiring tax increases and some of the revenue diversions
included in prior budgets. Funding for education is increased, both at
the K-12 and higher education level. Medicaid funding is also expected
to rise, reflecting implementation of the Affordable Care Act Medicaid
expansion and increased caseloads. Employee furloughs are maintained at
six per year but step and merit pay increases are reinstated. General
fund revenues are slightly ahead of forecast through March.

Among the state's financial control tools are a constitutional
requirement to balance the budget, 95% budgeting - the budget must
provide for a reserve of not less than 5% of all proposed general fund
operating appropriations and authorizations - and a new requirement to
set aside 1% of expected revenues at the start of each fiscal year in
the rainy day fund. Revenues are estimated on a regular basis by the
Economic Forum, composed of members appointed by the governor, the
Senate majority leader, and the speaker of the Assembly. The state
budget director must use the Economic Forum projection in preparing the
biennial budget. The state also conducts regular, frequent debt
affordability analyses to ensure its ability to pay debt service within
the existing property tax rate and has a policy of maintaining a minimum
reserve of six months of the following year's debt service in the
Consolidated Bond Interest and Redemption Fund.

MODERATE LONG-TERM LIABILITIES

The bonds are general obligations of the state, and the state's full
faith and credit are pledged, although the property tax pledge is
statutorily limited to $3.64 per $100 of assessed valuation for all
overlapping units of government. Statutes further provide priority for
taxes levied for debt service and a requirement to borrow from the
general fund, to be repaid from future property tax revenues, if the
annual collection is insufficient to pay GO debt service. The state's
tax rate dedicated to debt service is $0.17 and state law includes a
permanent appropriation for such payment.

The current offering refunds outstanding debt for debt service savings.
With about 30% of state GO debt supported by program revenues and
considered self-supporting, debt ratios are moderate with net
tax-supported debt of approximately $2 billion, or 1.9% of 2013
estimated personal income. The system-wide funded ratio of Nevada PERS
was 69.3% as of June 30, 2013, down from most recent peak of 77.2% in
2007. Using a more conservative 7% investment return assumption, the
funded ratio would fall to 62.5%. Although pension funding has declined,
the burden of the state's net tax-supported debt and Fitch-adjusted
unfunded pension obligations as a percent of personal income remains
below the median of the U.S. states rated by Fitch.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE
RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR
RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
WEBSITE.